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Credit Cards: astute decisions reap rewards

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Cruising through the fjords of southern Chile, I took the Navimag ferry. There are certainly fancier options but this suited me and my budget.

When I’m buying travel I want value for my money.

Value can be luxurious or very basic – it depends on my mood and the trip. What’s important to me (and many others) is that I get the quality I want for the fewest dollars.

Credit card points can help. In the past, my modus operandi when it came to credit cards was to choose the free credit card with the most benefits.

Then I learned better. I now happily pay a fee for my card every year because I earn back that fee many times over in real currency. I receive soft benefits as well.

A recent American Express survey of Canadians found that while they value rewards programs, they’re passive when it comes to choosing their credit cards. Only 15% say they research their options and most (60%) admit that they simply use the card that their bank suggests. Let’s change this.

But transparency first: this post is sponsored by American Express. They want people to think carefully about the credit cards they choose. I do too. My whole mission is to help people travel more. So exploring the credit card rewards game is relevant. To be clear, the views and opinions expressed in this post are purely my own.

Sometimes a little luxury is needed too and rewards can help you get it. This is the Missoni Hotel in Edinburgh.

The right credit card can help you travel more.

The results of the American Express survey are clear. Travelers are leaving money on the table. I understand – who has time to sort out which of the dozens of cards make the most sense for you. But, if the process takes two hours and you earn, say, $500 per year from your card I think those are two hours well-spent. So let’s get to an analysis.

The challenge is in determining which card is right for you and your lifestyle. To do so you need to look at:

The card cost

Your spending habits

The benefits that the card offers.

Since the financial rewards are important to most people, let’s start there.

I love a road trip. This was in Emilia Romagna, Italy. Flight, hotel, car rental… there are lots of ways that the right credit card helps with a trip like this.

The money and points equation.

Points are earned with most credit cards. However, what it takes to earn a point and the value of a point when cashing it in will vary from one credit card to another. To determine which card is best for you, it’s important to dig into the details.

Look first at how points are earned

Using the American Express Gold Rewards Card I earn:

2 points per dollar spent using the card at eligible gas stations, grocery stores and drug stores in Canada and on eligible travel purchases, including flights, hotels, car rentals, cruises. Hmm, but what does eligible mean? I looked at the footnotes and the eligible gas, groceries and drugs are those where one of the three is the primary business of the store. As for travel, the ineligible purchases are local transit. Works for me.

1 point for every other dollar spent on the card.

What I like here is that the things that almost everyone must buy get double points whereas discretionary items such as clothes and entertainment don’t. This is one of the reasons this card works for me.

Now look at the value of a point when cashed in.

With American Express Gold Rewards Card, I earn $10 for every 1000 points.

To decide whether this is a useful card for me, I needed to play out a scenario – as will you. Assuming that I spend $30,000 per year on my card (I use if for everything) my points will add up this way:

70% would qualify for double points. That’s 42,000 points

30% wouldn’t qualify so, at single points, that’s 9,000 points

Total: 51,000 points.

At 1000 points per $10 that adds up to $510 worth of value.

I’ve run the scenario for other cards as well and, on a straight points for dollars basis, the American Express Gold Rewards Card came out as the better choice. But, there are other issues at play. Let’s dig deeper.

Beyond the dollars: other reasons behind my credit card choice.

Understanding the cost and value of points is important when choosing a card but so are the mechanisms for claiming your rewards and the other benefits on offer. I like the American Express Gold Rewards Card because I can:

Charge any travel I find to my card and then call American Express to redeem the points to pay for all or part of my travels – this even works for taxes and fees.

I can also wait, accumulate more points and redeem them towards my travel charge up to 12 months after my trip. This is a huge benefit for those who travel only once or twice a year.

Transfer points instantly 1:1 to Aeroplan and Avios Delta SkyMiles, Asia Miles, Starwood Preferred Guest and more to take advantage of special offers they may have.

If you have the Gold Rewards Card, you can earn 10,000 Membership Reward points when you refer a friend to the Card, that’s enough for a $100 credit on your next flight. Plus your friend will earn 25,000 Membership rewards points, which is enough for your friend to redeem for a flight anywhere in North America.

So, it’s not just a matter of liking the return on my points that has me preferring the American Express Gold Rewards Card but also the other benefits as outlined above.

Please note: to win with credit card rewards, you need to pay the card off every month. If you pay interest on your card, you will likely negate any value you’ve earned.

Canadians: the American Express Gold Rewards Card

As mentioned above, American Express has sponsored this post. I hope the analysis above will encourage you to check out the American Express Gold Rewards Card as part of your research. At the moment, they’re offering some additional benefits:

No annual fee for first year – it’s $150/year after that.

A Welcome Bonus of 25,000 Membership Rewards points when you charge $500 in purchases to your Card in your first 3 months of card membership. (That’s a short-haul flight.)

I think you missed an important issue with credit cards. I have two affinity cards and they are free and give frequent flyer miles. Look at any professional organizations that you may belong to—these have cards for their members who are well-paid, and they pay their bills—ergo, better credit cards. Look also to credit unions. These are the same. My credit union’s card has an 8% interest lever, but I pay it fully every month.

Terence

I use Amazon’s Visa: No annual fee, no foreign transaction fees. Use in any country without incurring any extra credit-card gouging. BTW you can shove your Amex!

Robyn Fisher

Sears Financial MC offers no additional charges (after standard currency exchange) for foreign currency use. It advertises itself as the only Canadian card that doesn’t make the extra service charge for each transaction. Works for me.

Janet Rattray

another plus to me of my system is that I deposit what I have estimated will be my pocket money for the trip in my Schwab account. When I get home I’m not looking at my credit card charges that have to be paid. I have none.

solotraveler

Thanks for sharing your experiences. I don’t use a credit card for cash advances because, unlike a purchase, the interest usually starts accumulating right away.

I don’t think doing research on cards is a waste of time but, unfortunately I do think it has to be done almost yearly. As you say, things change quickly. Loyalty programs are here to stay so we should make the most of them.

solotraveler

Thanks for the detailed suggestions. I totally agree that more than one card is necessary. I operate with two cards mostly but have a back up card just in case.

Janet Rattray

I have an American Express card because that is the only one Costco accepts. Costco is the only place I use it. Mainly for gas (no points on Costco gas!). Beware traveling with just an American Express. It is not accepted in many places. I travel with a United Airlines card from Chase and a debit card for my Charles Schwab savings account. I charge everything on my Chase card during the year and earn free flights to Europe. A lot more value than the $500.00 cash on American Express. When I am out of the country I withdraw whatever cash I need in the local currency with no fees. I even use it sometimes several times a day, withdrawing small amounts as I need them rather than being left with small amounts of the local currency as you move on. I researched this carefully and this system works for me. Two other important bonuses for me are priority boarding with my card and two passes a year to the business lounge. I travel to Switzerland at least twice a year to visit family and love the passes for the 4 or 5 hours I need to spend in Newark before boarding my flight to Geneva.

fred

Hi–I just spent 6 weeks backpacking around Europe. I used a Capitol One credit card issued in Canada. I learned the hard way that while I kept a zero balance before traveling but when I tried to use it for cash advances more than twice I was cut off. There was a limit on how much I could cash advance. Anyhow, the point is buyer beware. I had thought I had done my homework as this is the card I use most but in fact I could have got another card that had a higher level of cash advance based on the balance allowed(this card had a 5000 limit).Lesson learned and now, having told Capitol One this I move on—they won’t budge on the limit.

On that note I, like many Canadians are not really passive in credit card choice. Your article lays out why most don’t look into it deeply—it is an utter waste of time. All the hidden rules, the ineligible stores, the right time to buy, the right country, hidden costs, changing in rates after purchases, or timeframes……the list of problems goes on

About Solo Traveler

I'm an author, blogger, speaker and traveler. I became a widow and empty-nester at about the same time. And then, I became a Solo Traveler. Full Story >>

I'm a writer, editor, food and wine fanatic, and traveler. On my very first trip abroad I learned that solo travel was for me. Full Story >>

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